Meta Narrows Full-Year Capex Range, Unveils Nonvoting Class C Shares Amid Litigation Costs

Meta Platforms used its third-quarter report to tighten its full-year capital spending outlook, introduce a new class of nonvoting stock meant to help finance its artificial-intelligence buildout, and guide fourth-quarter revenue above Wall Street's prior estimate, according to CNBC. The update landed alongside fresh legal costs tied to a multistate child-safety settlement and a separate New Mexico privacy judgment, which Seeking Alpha reported weighed on earnings even as revenue beat expectations.

Capex guidance narrows as spending climbs

Meta narrowed its full-year data center-related capital expenditure guidance to a range of $135 billion to $145 billion, up from a prior range of $130 billion to $145 billion, CNBC reported. Analysts had been expecting full-year capex of about $138.27 billion, according to the same report. Baird analysts, cited by CNBC, wrote ahead of the report that a capex guidance increase for "2026/2027" could be "received more positively (or less negatively) by investors now that the company is demonstrating a clearer ROI, despite the lack of a cloud platform" to monetize the spending.

Meta's fourth-quarter revenue guidance of $73 billion to $76 billion carries a midpoint above the $73.73 billion analysts had estimated, CNBC reported. Bank of America had separately projected a third-quarter sales beat, with revenue of $63.8 billion, based in part on what the firm called "solid ad checks," while expecting Meta's Muse AI products to largely "consume capacity w/o near-term revs" for the rest of this year and 2027, according to CNBC.

A new nonvoting share class to fund AI spending

Meta disclosed it will create a new class of nonvoting Class C common stock, effective January 2027, to be distributed to existing shareholders as a dividend that CNBC described as effectively a two-for-one stock split, with the new shares beginning to trade in the new year. The company said the structure is intended to "provide Meta the ability to finance its growth and help the company remain a leader among fierce competition both domestic and international," while continuing "the founder-led model that has driven the company's success since its inception," according to the earnings release cited by CNBC.

Meta also disclosed it has entered into a Founder Alignment Agreement with Zuckerberg governing his sales of the Class C stock he receives in the dividend, his service at the company, and conditions for any future Class C dividends, CNBC reported. Interpretation, based on Meta's own description of the structure: because the Class C shares carry no voting rights, the company can expand its share count to help "finance its growth" without altering the existing distribution of voting power behind what it called "the founder-led model."

Legal costs mount on two fronts

Meta's quarter was shadowed by two separate legal matters. In August, the company agreed to pay nearly $17 billion to settle a lawsuit brought by a coalition of state attorneys general, including California's Rob Bonta, over allegations it misled the public about child mental-health harms tied to design features in apps such as Facebook and Instagram, CNBC reported. Ahead of the earnings release, Wolfe Research analysts warned the settlement could cause Meta to miss third-quarter EPS expectations because of an associated $10 billion legal charge they said "the street has not yet accounted for," according to CNBC's citation of the note. Meta still faces numerous personal-injury claims and a separate federal case brought by a group of nationwide school districts alleging similar harms to children, CNBC reported.

Separately, on the day of the earnings report, a New Mexico district court judge imposed a $25 billion penalty on Meta in a state data-privacy case tied to the 2018 Cambridge Analytica revelations, reducing an initial $219.5 billion award that had been based on more than 43 million violations of the state's unfair practices act, CNBC reported.

Core business metrics

Advertising remains Meta's primary revenue driver. Third-quarter ad revenue was expected at $61.87 billion, up from the $59.36 billion in second-quarter ad sales the company reported in July, CNBC reported. Reality Labs, Meta's virtual- and augmented-reality unit, was expected to post a third-quarter loss of $4.54 billion on $513 million in sales, according to StreetAccount data cited by CNBC, following a second-quarter loss of $4.62 billion on $431 million in revenue. Daily active people across Meta's family of apps came in at 3.64 billion in the third quarter, trailing the 3.65 billion analysts polled by StreetAccount had expected, CNBC reported.

On the monetization side, Meta is charging $20 and $100 monthly subscriptions for its Muse AI agent and $50 or $200 a month for developers to access the more powerful Muse Wonder Full model through its coding agent, which debuted in early August, according to CNBC.

Market and sector context

Meta reported first among the "hyperscaler" group this earnings cycle, with Alphabet, Microsoft and Amazon due to report the following week, CNBC reported. The four companies have together guided to roughly $730 billion in capital expenditures this year as they build out AI infrastructure, a figure analysts polled by FactSet expect to approach $1 trillion next year, led by Alphabet at more than $310 billion, according to the same report. On the day of Meta's report, broader markets closed higher, with the Nasdaq Composite up 1% and the S&P 500 up 0.5%, as technology shares recovered from concerns about the durability of AI-driven growth, according to Seeking Alpha.

Bottom Line

Meta lifted the floor of its full-year capex range while signaling, through the new nonvoting Class C structure, that it intends to keep funding AI infrastructure under what it described as a continuation of its founder-led model. At the same time, the quarter carried sizable legal costs: the nearly $17 billion attorneys general settlement reached in August, which Wolfe Research tied to a $10 billion charge, and the $25 billion New Mexico privacy penalty imposed on the day of the report, with additional personal-injury and school-district cases still outstanding, CNBC reported.